RYM - Ryman Healthcare

[Shareguy]

The Trust I am a trustee of holds OCA [av cost approx $1.05] RYM [average cost approx $2.14] and SUM [av cost approx $2.40}.
We have no intention of selling any of the above shares.
All three have strong boards,good management, and although the tail winds have stopped currently, I expect the tail winds will strengthen in the longer term again,with the rapidly ageing population driving demand for a safe,secure,happy retirement .
We did not buy ARV as we had enough exposure to the sector.

Agree with you Percy. I have shares in all the main four. Rym and Sum have had for years at similar costs to you. Have been adding to my position in Oca over the weeks and currently over six figures and still buying. Ryman has been under performing for some time but have no intention to sell. All the reports I have seen show a massive shortage of retirement accomodation looming. And certainly not worried about COVID or some who think the property market is going to tank.

[Maxtrade]

Agree with you Percy. I have shares in all the main four. Rym and Sum have had for years at similar costs to you. Have been adding to my position in Oca over the weeks and currently over six figures and still buying. Ryman has been under performing for some time but have no intention to sell. All the reports I have seen show a massive shortage of retirement accomodation looming. And certainly not worried about COVID or some who think the property market is going to tank.

Thoughts to the level that interest rates will rise to 2022/2023 with the debt exposure Rym currently has?? May provide hurdles to SP comparatively compared to the other RV operators such as, OCA, RAD, SUM.

[BlackPeter]

Thoughts to the level that interest rates will rise to 2022/2023 with the debt exposure Rym currently has?? May provide hurdles to SP comparatively compared to the other RV operators such as, OCA, RAD, SUM.

You sure that interest rates are relevant to their debt exposure?

Haven't recently analysed Rymans balance sheet but would have thought that Ryman is in that regard not different to other retirement villages: Most of their liabilities are funds "borrowed" from the residents (when they "buy" the right to live in the units) and interest free to the retirement villages.

Does not matter to them what the market rates might be ...

[Maxtrade]

You sure that interest rates are relevant to their debt exposure?

Haven't recently analysed Rymans balance sheet but would have thought that Ryman is in that regard not different to other retirement villages: Most of their liabilities are funds "borrowed" from the residents (when they "buy" the right to live in the units) and interest free to the retirement villages.

Does not matter to them what the market rates might be ...

These figures are a bit outdated now.... But 3rd quarter 2021 balance sheet data showed that Ryman Healthcare had liabilities of approx $750m due within a year, and liabilities of $5.6b falling due after that. Offsetting this, it had $20m in cash and $542m in receivables that were also due within 1 year. Therefore liabilities outweighed approx $5.78b. I would say some of their debt liabilities incur interes. Hence relevancy of exposure to increasing interest rates?

[BlackPeter]

These figures are a bit outdated now.... But 3rd quarter 2021 balance sheet data showed that Ryman Healthcare had liabilities of approx $750m due within a year, and liabilities of $5.6b falling due after that. Offsetting this, it had $20m in cash and $542m in receivables that were also due within 1 year. Therefore liabilities outweighed approx $5.78b. I would say some of their debt liabilities incur interes. Hence relevancy of exposure to increasing interest rates?

May I direct you to page 89 of their latest annual report ... ?"

It won't be hard for you to calculate that only roughly 1/3rd of their liabilities is interest bearing", which makes a rather conservative balance sheet ...

While they might suffer as everybody else from rising wages, staff shortages and dropping property prices (i.e. potential revaluation losses - shudder) ... I am pretty sure that rising interest rates are not the biggest of their problems.

[Jim]

I think slowing house prices will be the next biggest worry.

[Greekwatchdog]

Foe Bars update 29/03.

NEUTRAL


We upgrade Ryman Healthcare (RYM) to NEUTRAL from UNDERPERFORM. After RYM's share price weakness over the last four months we no longer see any downside to our (reduced) target price of NZ$9.90. We believe that RYM's valuation fairly reflects the combination of low cash recovery of capex and declining care earnings, offset by a strong track record of delivering organic growth and a path for long term growth in Australia. Going forward our focus is on: (1) potential for increased care funding to offset care cost increases; (2) ability to recover more of the substantial capex that has been spent in Australia; and (3) capturing the previous two years House Price Inflation (HPI) through increased resales margins.


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NZX Code RYM
Share price NZ$9.20
Target price NZ$9.90 (from 10.80)
Risk rating Medium
Issued shares 500.0m
Market cap NZ$4,600m
Avg daily turnover 558.9k (NZ$6,985k)
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Financials: Mar/ 21A 22E 23E 24E
NPAT* (NZ$m) 224.5 202.7 214.2 240.8
EPS* (NZc) 44.9 40.5 42.8 48.2
EPS growth* (%) -7.2 -9.7 5.7 12.4
DPS (NZc) 22.4 16.2 17.1 19.3
Imputation (%) 100 100 100 100
*Based on normalised profits
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Valuation (x) 21A 22E 23E 24E
PE 20.5 22.7 21.5 19.1
EV/EBIT 27.1 30.1 28.8 24.8
EV/EBITDA 23.9 25.9 24.4 21.1
Price / NTA 1.6 1.4 1.3 1.1
Cash div yld (%) 2.4 1.8 1.9 2.1
Gross div yld (%) 3.4 2.4 2.6 2.9
What's changed?
Earnings: FY22/FY23/FY24 underlying earnings +16%/-1%/0%. Annuity EBITDA +14%/+1%/0%
Target price: Downgraded to NZ$9.90 (from NZ$10.80) due primarily to WACC changes
Rating: Upgraded to NEUTRAL from UNDERPERFORM
FY23/FY24 numbers largely unchanged — FY22 upgraded due to reversal of Omicron resales pause
We have left our substantially (~-20%) below Visible Alpha consensus estimates for FY23 and FY24 largely unchanged but have increased our FY22 estimates by ~+15% as we reverse our previous expectations of an Omicron induced pause in new and resales following commentary from several of the aged care operators. Our difference versus consensus primarily relates to our expectations of operating expenses which are c. +10% ahead of consensus throughout FY22–FY24.


We expect care EBITDA to halve in FY22 — path to recovery dependant on uncertain but possible increase in government funding
We estimate that RYM's care EBITDA margins declined by approximately one third from FY14 to FY21 as cost growth outpaced revenue growth by ~40%. In FY22 we expect care EBITDA margins to halve from FY21. The dramatic deterioration of care profitability is being felt across the sector and is not unique to RYM, although the medium term impact is larger as RYM is unable to offset the cost pressures through increased prices of care suites. Going forward, we believe there will be increased pressure on the government to materially lift funding. The listed sector is able to offset these cost pressures with profits and cash flow from village operations, something which will be more difficult for smaller and more care heavy operators.


Where from here? Balanced risk reward
We believe the downside risk for RYM centres around (even) higher cost growth than we are modelling and continued poor cash recovery of capex. However, we see the potential for a positive government care funding outcome, maturing Australian operations and a determination to capitalise on embedded value within its resale stock as offsetting this.

[Sideshow Bob]

FB also reckon chance to get tossed out of MSCI index in the May review

https://businessdesk.co.nz/article/i...i-forsyth-barr (Paywall)

[winner69]

Article mentions a target price of $15.85

Love it when analysts talk dirty with words like 'narrow moat' and 'transient issues' --- "The market has seemingly penalised narrow-moat Ryman for transient issues or industry-wide problems not shared by Ryman,"


Ryman shares look very cheap

https://businessdesk.co.nz/article/i...ap-morningstar

Might be paywalled

[Mel]

FB also reckon chance to get tossed out of MSCI index in the May review

https://businessdesk.co.nz/article/i...i-forsyth-barr (Paywall)

The MCSI index review is due out today - will be more than interesting to see if RYM features in it......